Tuesday, September 30, 2008

Election 2008: Person or "Thing"

A) Personal Responsibility or Financial Meltdown?

Driving home to Riverside last Friday afternoon, Bill Orchard wanted to share something with me that he thought I’d like: that the root of the present economic crisis was dumbing down the person and "the personal" to “thing.”Expatiating on this: the loan (the mortgage on property) is a personal relation that is established with a person at a bank in which there is the establishment of credit and personal responsibility on the part of the borrower with the personal overseer of the bank. A relation is established between the two parties that is personal as free and therefore, responsible.The next step is most interesting (and devastating unless re-personalized). The bank, at that point, sells that loan – which is a personal and equitative relation between persons - to institutions which “securitize” them, and sell them again piece meal to private investors, thus diversifying risk to many risk-takers. Without considering the many factors that exacerbate the lack of personal responsibility (subprime mortgages, no down payments or no interest in first two years, etc.), it seems that the profound problem under the surface is that relationships of person to person were jettisoned. The mortgage between the persons, borrower and bank representative, ceased to be a bond of “gift”[1] and responsibility and was turned into a “thing” that was “securitized” and consumed as an asset by third party structures. This then becomes the taxable responsibility of the working person where alone absolute value is to be found.

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Personal Meltdown and Fiscal Irresponsibility of the Borrower Disguised as Social Doctrine

One Historical Account of the Politization of the Personal Relation: Stanley Kurtz:

“The seeds of today's financial meltdown lie in the Community Reinvestment Act - a law passed in 1977 and made riskier by unwise amendments and regulatory rulings in later decades.
CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in "subprime" loans to often uncreditworthy poor and minority customers.
Any bank that wants to expand or merge with another has to show it has complied with CRA - and approval can be held up by complaints filed by groups like ACORN.
In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America's financial institutions.
[This is a key moment: the introduction of Fannie and Freddie into buying the bad loans and reoffering them on world markets, thus protecting the damaging hand-out disguised as Christian social doctrine]
Banks already overexposed by these shaky loans were pushed still further in the wrong direction when government-sponsored Fannie Mae and Freddie Mac began buying up their bad loans and offering them for sale on world markets.
Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster. …
In February 1990, Illinois regulators held what was believed to be the first-ever state hearing to consider blocking a thrift merger for lack of compliance with CRA. The challenge was filed by ACORN… Officials of Bell Federal Savings and Loan Association, (…), complained that ACORN pressure was undermining its ability to meet strict financial requirements it was obligated to uphold and protested being boxed into an "affirmative-action lending policy."( …)
Two months later, aided by ACORN (…) announced plans to conduct demonstrations in the lobbies of area banks that refused to attend an ACORN-sponsored national bank "summit" in New York. She insisted that banks show a commitment to minority lending by lowering their standards on down payments and underwriting - for example, by overlooking bad credit histories.
By September 1992, The Chicago Tribune was describing (… the) program as "affirma-tive-action lending" and ACORN was issuing fact sheets bragging about relaxations of credit standards that it had won on behalf of minorities.
And (efforts were made to) drag banks "kicking and screaming" into high-risk loans. A September 1993 story in The Chicago Sun-Times presents (…) an initiative in which five area financial institutions (including two of her former targets, now plainly cowed - Bell Federal Savings and Avondale Federal Savings) were "participating in a $55 million national pilot program with affordable-housing group ACORN to make mortgages for low- and moderate-income people with troubled credit histories."
What made this program different from others, the paper added, was the participation of Fannie Mae - which had agreed to buy up the loans. "If this pilot program works," (…) "it will send a message to the lending community that it's OK to make these kind of loans."
Well, the pilot program "worked," and Fannie Mae's message that risky loans to minorities were "OK" was sent. The rest is financial-meltdown history. “

* * * * * *

I must say that it struck me as blinding insight that, at root beneath the surface of the entire economic debacle that we are now facing, the ultimate root of the problem is the crisis of the person as relation. Or better, the loss of the subjectivity of persons to the objectivized dumb-down of "thing" (Money). Political pressure (ACORN) is put on banks to increase their mortgage business from 2% in 2002 to 30% in 2003, together with the greed to get money with 1% (or without) and with no hope of returning it. It looks like social doctrine of the Church but it ultimately de-humanizes and banrupts. And so the depersonalization of greed takes place on both sides. The non-qualified borrower is given the subprime mortgage as a gift which he consumes irresponsibly (which therefore damages him as a person), and the bank greedily gives away money that will be securitized by entities such as Fannie Mae, that in turn will have to be replenished by the taxed worker.

If the realist anthropology of the human person as subject is to be in relation, then the entire process has broken the personalization process that must obtain in an anthropology of work where work is an action whereby the person makes a gift of himself. Money is symbolic representation of the person’s work. If the relationship (represented by money) between the parties is reified by money that does not represent the relationship but is merely a “thing” that can be broken into pieces and owned by many as “their own,” then the “meltdown” is of the human itself, and not merely “the financial history.”

Consider the development of the meaning of work in John Paul II’s “Laborem Exercens.”

1) Work is the result of being made in God’s image. It consists in subduing the self as part of the earth in order to subdue the earth and name the animals. By so doing, material creation is raised to the level of relationality: “All things are yours, and you are Christ’s, and Christ is God’s” (1 Cor. 3, 23). You must master yourself, so that you can own yourself since private property comes from the work of mastering and subduing. Having subdued yourself, you are then free to subdue the earth and make it your own private property. But that process of subduing and owning is the condition of making the gift of yourself as image of a Trinity of three Person each of Whom is a relation to the Others. To be in relation is to be in a state of imaging God. This can only take place when there is ownership of self and earth to make a gift of it. All work takes on this meaning
2) There is an objective sense to work: the “thing” produced. The excellence of the “thing” produced must result from the involvement of the entire self in work as the creative process. The objective work of the laborer must always be the product of the artist who is informing the matter with his very self. Such a product, like the self, must be “good.”
3) However, in the very act of work which produces the “thing,” the “I” of the worker is mastered and subdued, thus defining who the "I" is. This self-mastery is the very act of freedom that can be substituted by no other. It is a priestly act of mediation where one gets control of oneself to make the gift of oneself. John Paul II says, “This dominion… refers to the subjective dimension even more than to the objective one: this dimension conditions the very ethical nature of work.”[3] As free, the act of work “has an ethical value of its own, which clearly and directly remains linked to the fact that one who carries it out is a person, a conscious and free subject, that is to say, a subject that decides about himself.”[4]
4) Possession of anything – including oneself – is always connected to work, but it cannot be kept as one’s own. It must always be gift, as the self is never for oneself but to be for the others. The deep anthropological reason for this is the nature of the human person as image of the divine Persons. Paraphrasing Augustine, nothing is so little one’s own as oneself. John Paul II wrote: “Property is acquired first of all through work in order to that it may serve work. This concerns in a special way ownership of the means of production. Isolating these means as a separate property in order to set it up in the form of ‘capital’ in opposition to ‘labor’ – and even to practice exploitation of labor – is contrary to the very nature of these means and their possession. They cannot be possessed against labor, they cannot even be possessed for possession’s sake, because the only legitimate title to their possession – whether in the form of private ownership or in the form of public or collective ownership – is that they should serve labor, and thus, by serving labor, that they should make possible the achievement of the first principle of this order, namely, the universal destination of goods and the right to common use of them. From this point of view, therefore, in consideration of human labor and of common access to the goods meant for man, one cannot exclude the socialization in suitable conditions, of certain means of production….
"From this point of view the position of ‘rigid’ capitalism continues to remain unacceptable, namely the position that defends the exclusive right to private ownership of the means of production as an untouchable ‘dogma’ of economic life. The principle of respect for work demands that this right should undergo a constructive revision, both in theory and in practice.”[5]

This last point – socialization of certain means of production – does not mean a handout which is, in itself, destructive of the critical anthropology of self mastery. As freedom and priesthood of mediation between self and the others, the person corrupts within himself if everything is put into his hands without love as incentive and affirmation to subdue himself so as to truly become himself in giftedness. What seems to have taken place throughout the society is a domino effect of handout that has damaged both the receiving poor and the lending subject who in turn is loaned to ... who in turn is loaned to ... and who in turn is loaned to.... Money progressively loses its value as it is untethered and disconnected from the work process where alone it takes its value as the symbol of the working person.

Be Not Afraid

Because of the materialization of reason which dumbs-down economics from a human ethic to a positivist technology, the “Cure for Greed,” as presented in the New York Times (9/29/08, A 20), is “fear.” In a secularized culture dominated by material security and money, salvation comes from fear. In the editorial “Notebook from yesterday's editorial page, The Times writes: “Yet despite the consistent failure to temper our greedy nature, I still have hopes. Because there is a crucial brake that has been missing from the edifice of high-tech financial capitalism – a counterbalance at the other end of the scale from where utility gets maximized. That piece is fear. My suggestion, then, is to put fear back in the picture. When the banker who loses his or her bank also loses his or her shirt, greed will be tempered. At least for a while[6] (emphasis mine).

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B) Downs Syndrome Baby or Abortion?

The crisis on the other side of the equation: abortion and the family is constantly under the surface. The immense reaction of the country – be it both positive and negative – with regard to Sarah Palin is ultimately her persona. It is not her expertise, her experience or lack of experience in international affairs, not even her beauty as a woman. Ultimate, it is the family, her children, having the Downs Syndrome baby at great personal cost in the labor, and saving the baby of her pregnant daughter. Again it is the person, the absolute value of the person and their relations. It is this deep value, or the rejection of the person, that is at work deep down within the population.
At the moment, I am reading the “substance” of John Macmurray’s Gifford Lectures of 1953 in a volume called “The Self As Agent.”[1] In the first chapter, “The Crisis of the Personal,” he says: “I need hardly labour to convince you that the cultural crisis of our time is a crisis of the personal. This is… a conclusion of those who look deeper into the troubles of our society than the superficial level of organizational strain, whether economic or political. I need only refer to two aspects of the situation, both very familiar, in order to make clear what I mean by a crisis of the personal. One of these is the tendency towards an apotheosis of the state; the other the decline of religion. The two are intimately connected; since both express a growing tendency to look for salvation to political rather than to religious authority. The increasing appeal to authority itself reflects a growing inability or unwillingness to assume personal responsibility.”[2]These two things stand out. 1) The “apotheosis of the state” is the bailout of $700 billion to smooth over the rupture of the personal relation and personal responsibility in the borrowing and lending of money. The whole of economics is built on the dynamic of the working person, not on the structures of capitalism or socialism. Break that personal dynamic and you turn the person of the worker into a “thing.” You “reify” him, and so destroy the economic, and the person. See John Paul II’s “Laborem Exercens” #6. 2) The “decline of religion” is the decline in dignity of the Downs Syndrome baby.In a word, the real crisis of the moment is the crisis of the person, and I believe that this is the real issue in this election - independent of political parties.

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Economics: A Human, Moral Action

I was roundly dismissed as an economic ignoramus by Larry Cudlow in a talk given in the 90’s. In terms of economic expertise, Larry was indeed correct, and continues to be so. However, my point was not economics as a positive science but as a human act and therefore subject to moral scrutiny.

That said, the occasion for undermining my moral authority was the reference I made to Joseph Ratzinger’s paper “Market Economy and Ethics”
[7] (posted yesterday). Larry immediately leaped on the reference Ratzinger made to Adam Smith Smith’s laissez-faire economy that champions self-interest, the division of labor, the function of markets, “the invisible hand” of divine Providence, etc. and groused about Ratzinger’s insistence that economics needed internal regulation by a moral dimension.

Ratzinger offered that Smith’s “position holds that the market is incompatible with ethics because voluntary ‘moral’ actions contradict market rules and drive the moralizing entrepreneur out of the game. For a long time, then, business ethics rang like hollow metal because the economy was held to work on efficiency and not on morality.
4 The market's inner logic should free us precisely from the necessity of having to depend on the morality of its participants. The true play of market laws best guarantees progress and even distributive justice. “His basic critique of this is the presence of a concealed “determinism.” He wrote: “The great successes of this theory concealed its limitations for a long time. But now in a changed situation, its tacit philosophical presuppositions and thus its problems become clearer. Although this position admits the freedom of individual businessmen, and to that extent can be called liberal, it is in fact deterministic [my underline] in this core. It presupposes that the free play of market forces can operate in one direction only, given the constitution of man and the world, namely, toward the self-regulation of supply and demand, and toward economic efficienty and progress.”[8] He goes on: “This determinism, in which man is completely controlled by the binding laws of the market while believing he acts in freedom from them, includes yet another and perhaps even more astounding presupposition, namely, that the natural laws of the market are in essence good (if I may be permitted so to speak) and necessarily work for the good, whatever may be true of the morality of individuals. These two presuppositions are not entirely false, [because they contain the profound truth of the free self-determination of the person as imaging God], as the successes of the market economy illustrate. But neither are they universally applicable and correct, as is evident in the problems of today’s world economy. [This was delivered in 1985, some four years before the economic and political collapse of the Soviet Union].

He then proposes the thesis that is enunciated in the mouth of Peter Koslowski that brought the scorn of Cudlow on me: “’The economy is governed not only by economic laws, but is also determined by men…’ Even if the market economy does rest on the ordering of the individual within a determinate network of rules, it cannot make man superfluous or exclude his moral freedom from the world of economics. It is becoming ever so clear that the development of the world economy has also to do with the development of the world community and with the universal family of man, and that the development of the spiritual powers of mankind is essential in the development of the world community. These spiritual powers are themselves a factor in the economy: the market rules function only when a moral consensus exists and sustains them.”

Ratzinger then turns to consider “the tensions between a purely liberal model of the economy and ethical considerations.” He says that “the inherent inequality of various individual economic zones [not only within a national economy but also between hemispheric economies such as North and South] endangers the free play of the market, attempts at restoring the balance have been made since the 1950s by means of development projects. It can no longer be overlooked that these attempts have failed and have even intensified the existing inequality. The result is that abroad sectors of the Third Word, which at first looked forward to development aid with great hopes, now identify the ground of their misery in the market economy, which they see as a system of exploitations, as institutionalized sin and injustice. For them, the centralized economy appears to be the moral alternative, toward which one turns with directly religious fervor…”[10]

Ratzinger then goes to his point: “For while the market economy rests on the beneficial effect of egoism and its automatic limitation through competing egoisms, the thought of just control seems to predominate in the a centralized economy, where the goal is equal rights for all and proportionate distribution of goods to all.”

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Is this not uncannily close to the situation we are in at this critical moment in the United States. In 1977, the Community Reinvestment Act was passed into law. It was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. Affirmative action put pressure on the banks to make the loans and increased the pressure by making expansion and mergers with other banks difficult by accusing them of racism. When these loans were not repaid, Fannie May stepped in and began buying the bad loans and offering them for sale on world markets. Fannie and Freddie acted in response to Clinton administration pressure to boost home ownership rates among minorities and the poor.

This is the critical point of the crisis. It is not the bailout of the entire financial system, and the mechanics of it. The critical point is the assumption that the entire problem is merely economic as a positivistic determinism a la Adam Smith.

Is there a moral value involved in lending money to a person - who we know will not be able to repay the gift -, provided we will be bailed out for the money by a third anonymous source, and without solution to the person now left in deep debt and exacerbated penury. Isn’t there a comparison to Ratzinger’s reference to the “Third World, which at first looked forward to development and with great hopes, (which) now identifies the ground of its misery in the market economy, which it sees as a system of exploitations, as institutionalized sin and injustice.”

Notice that the Wall Street Journal now assumes that the root of the problem is not the positivist mechanics of the economic system as proclaimed by Adam Smith, but greed. The Journal wrote on September 22, 2008:

“Yes, greed is ever with us, at least until Washington transforms human nature. The wizards of Wall Street and London became ever more inventive in finding ways to sell mortgages and finance housing. Some of those peddling subprime loans were crooks, as were some of the borrowers who lied about their incomes. This is what happens in a credit bubble that becomes a societal mania.”
And even Larry Cudlow made positive reference to Dan Henninger, one of the WSJ editors, who wrote on Sept 25, 2008:
The canyons of Wall Street are ringing with Democratic politicians and liberal pundits crying out for the renewal of ancient values and a return to basics. The political right wants market failures to be punished with Old Testament ruin.
“So we're all agreed: Standards of behavior matter.
“All that remains is to see if this week's left-right consensus on standards can be extended to any corner of American life beyond "CEO pay" and other sitting ducks.
“Once we're done imposing Spartan discipline on the dining rooms of Wall Street, how about some of the same for the halls and classrooms of the average inner-city high school? A nation in panic at the sight of banks imploding has yawned for years while the public-school system melted down.
“A handful of Supreme Court decisions going back 40 years relaxed standards of oversight for dress codes, comportment, speech and expulsion, and the average school principal or teacher threw in the towel on daily discipline. Not my job.”

Is There An Absolute Value?

Work as Self-Gift, Not Commodity (“Thing”)

Yes! It is work. Only persons work. Animals do not work. Machines do not work. They “function.” Only persons work in a communion of persons where there is gift exchange. Ultimately, the value of the work is the presence of the "I" of the worker in the object “made.” Hence, there is an objective value of work, and a subjective value. The objective value is the work itself as a commodity that is exchanged. But if that work is the result of the gift of the "I"of the worker, which transforms it into a given-self (and therefore of excellent quality: the best possible in the creative process), then that work as gift must be returned to the giver in some form. It cannot be kept selfishly. It must keep moving.

“Whatever we gave been given is supposed to be given away again, not kept. Or, if it is kept, something of similar value should move on in its stead, the way a billiard ball may stop when it sends another scurrying across the felt, its momentum transferred. You may keep your Christmas present, but it ceases to be a gift in the true sense unless you have given something else away. As it is passed along, the gift may be given back to the original donor, but this is not essential. In fact, it is better if the gift is not returned but is given instead to some new, third party. The only essential is this: the gift must always move. There are other forms of property that stand still, that mark a boundary or resist momentum, but the gift keeps going.”

[1] See Lewis Hyde, “The Gift” Vintage (1983).
[2] The New York Post, September 29, 2008, 5.
[3] John Paul II, “Laborem Exercens,” #6.
[4] Ibid.
[5] John Paul II, Laborem Exercens #14.
[6] Eduardo Porter, “A Cure for Greed” NYT 9/29/08 A 20.
[7] J. Ratzinger “Market Economy and Ethics,” Symposium: “Church and Economy in Dialogue” (1985); published in Communio 13 (Fall 1986) 199-204.
[8] Ibid.

[10] Ibid.
[11] Ibid.
[12] Ibid.
[13] Lewis Hyde, “The Gift” Vintage (1983) 4.

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